Exclusive: In a Major Restructuring, Hewlett-Packard to Combine Printer and PC Groups

Hewlett-Packard will announce a sweeping reorganization today that will move its Imaging and Printing Group, once the jewel in the IT giant’s crown, under its PC-making Personal Systems Group, sources familiar with the matter tell AllThingsD.

Under the plan, Vyomesh “VJ” Joshi, long the executive vice president in charge of IPG, will leave the company. The combined business unit will report to Executive Vice President Todd Bradley, sources said.

Vyomesh "VJ" Joshi

HP had no comment.

A source familiar with HP’s thinking regarding the reorganization said the combination of the two groups is part of a cost-cutting and simplification measure of the type discussed by CEO Meg Whitman during HP’s last earnings conference call on Feb. 22. During that call, Whitman discussed ways of streamlining HP’s operations, both in how it interacts with customers and in how its employees do their jobs internally.

HP sees the two business groups — IPG sells printers both to consumers and businesses, and PSG sells PCs to consumers and businesses — as making more operational sense combined than apart, the source said. The plan is to have their line of business more readily integrated so they can approach customers together and with unified product offerings.

IPG was once the financial engine seen as keeping the rest of HP flush. It sells more printers than anyone else in the world, but makes most of its money selling ink cartridges and other supplies that tend to make higher profit margins than the printers themselves.

However, the IPG unit has seen its business decline in recent years. In its most recent quarter, HP reported that sales fell by 7 percent, to $6.3 billion, while the unit’s earnings from operations fell by 32 percent.

At the time, HP attributed the slide in the unit’s fortunes to its exposure to Japan, where many of its printers are built by Canon, and sold at a loss. The strong Japanese Yen created a currency headwind that hurt the business, and ongoing supply chain problems caused by last year’s earthquake and tsunami in Japan — plus the flooding in Thailand — also hurt the business, the company said. Joshi, 57, is a 31-year HP veteran, who has run the group since 2002.

PSG is the unit that had been considered for a spinoff as an independent company under HP’s previous CEO Léo Apotheker. The plan was pulled back after HP’s board of directors fired Apotheker; Whitman shelved the plan, arguing that the PC business gives HP needed size and scale in order to more effectively negotiate with component suppliers. Bradley, 53, the onetime CEO of the handset maker Palm, has run the group since 2005, and was a candidate to be CEO of the spun-out PC company, had the move occurred.

The combined business operation will give Bradley responsibility for what is easily the biggest group inside HP. Together, IPG and PSG accounted for $65 billion in sales in 2011, or more than 51 percent of HP’s overall sales. Combined profits were $6.3 billion. At that size, the combined group will be substantially larger than HP’s services group, at $35 billion in 2011 sales, and its Enterprise, Servers, Storage and Networking Group, which recorded $22 billion in sales.

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